UPDATED - On September 25, 2025, CSU announced the resignation of Mark Leonard for health reasons, effective immediately. Mark Miller (COO) will be stepping into the President role. Mark Leonard will remain as a director on the board. It does sound like a health-related issue, given the press release, unfortunately, and not related to the company itself. CSU has become a large, well-established company, and they have built a solid team behind Leonard over the years. And realistically, not a whole lot is likely to change operationally. 

There has been considerable uncertainty recently around AI and its impact on the software industry. In light of this, Constellation Software’s (CSU) executives held a call with investors, shareholders, and analysts to discuss how AI could influence the company’s strategy and business model.

Mark Leonard, CSU’s CEO, opened the call with a short story about technological disruption—and how even expert predictions can be wrong. In 2016, Geoffrey Hinton, the so-called “Godfather of AI,” predicted that AI would quickly replace radiologists and that people should stop training for that profession. Nine years later, the number of radiologists in the U.S. has grown from 26,000 to 30,000—an increase of 17%. The takeaway from this anecdote is that even those with deep knowledge of AI may struggle to predict how it will reshape professions—much like today’s uncertainty around programming roles. Whether AI will have a 10x or just a 10% impact on the software industry remains unclear. Leonard remarked that it’s hard to tell whether AI will lead to a “renaissance or a recession” in the programming world, and urged everyone to maintain a healthy skepticism.

The call lasted slightly more than an hour and a half, with questions covering various AI-related topics—including how CSU’s business units are responding to AI products developed by competitors, and how AI might influence CSU’s merger and acquisition (M&A) strategy. Below, we summarize the key themes that matter most to shareholders and investors—and what they should consider when evaluating CSU's position in the software space.

1. How are CSU’s business units applying AI in operations and new products?

Each subsidiary is investing in AI and reporting progress independently. The company shared some internal statistics:

• 27% of BUs are developing AI-powered products for their customers.

• 50% are using AI for sales and marketing.

• 61% are leveraging AI tools in R&D.

• 3% of BUs reported replacing employees with AI tools. However, other units have seen AI create new opportunities, requiring more—not fewer—staff.

There is currently no top-down AI mandate, but progress is being tracked at the operating unit level. While some duplication of effort exists due to decentralization, management does not see it as significant or concerning. CSU typically does not replace developers with AI; instead, it redeploys them to other productive areas.

2. Efficiency Gains from AI and the Real Moat in Vertical Market Software (VMS)

AI has enabled significant efficiencies in tool development—particularly through automation of tasks like unit testing and coding. However, Leonard cautioned that although AI may offer 10x productivity gains, if the resulting software is buggy, fixing and maintaining it becomes costly. This reduces the lifetime efficiency of AI-generated code.

In the VMS industry, CSU’s proprietary data provides a significant advantage. This data allows for the creation of AI solutions that are deeply embedded in customer workflows—making them difficult for competitors to replicate. Ultimately, Leonard emphasized that the real moat lies not in efficiency, but in staying close to customers, understanding their unique needs, and delivering real, integrated value.

3. How Do CSU’s Operating Units Respond to Competitors' AI Products?

CSU’s business units do not chase every new AI feature competitors release. Instead, they assess whether a feature delivers real customer value or is simply "AI washing"—adding AI labels for marketing without substantive benefit.

That said, CSU is not passive. It proactively pursues AI functionalities that genuinely benefit customers. Executives stressed the importance of partnering with customers to integrate AI into their existing systems—further increasing switching costs and customer stickiness.

4. Will AI Eat the Software Budget?

How does AI change CSU’s business model economics? Executives noted that customers don’t view software and AI separately—they see them as a unified investment category.

Rather than cannibalizing software spend, AI is likely to expand overall IT budgets by creating demand for customization and unlocking new capabilities. While some large clients may experiment with in-house AI, regulatory complexity and technical barriers make CSU’s offerings more attractive. AI will leverage, not consume, the IT budget.

5. How Does AI Affect CSU’s M&A Strategy?

Leonard made it clear: CSU is not opportunity-constrained. The company is actively looking to deploy capital and is not content to sit on a pile of cash. It continues to explore opportunities even outside the core VMS market, including hybrid data software.

While AI hasn’t materially changed how CSU values deals or applies discount rates, Leonard acknowledged that the uncertainty introduced by AI increases the risk that a deal won’t meet expectations. CSU’s traditionally high discount rates help maintain a margin of safety.

Conclusion

True to his style, Mark Leonard maintained a cautiously conservative but open-minded stance—especially regarding fast-moving trends like AI. He reiterated that even experts can’t predict where the technology will take us in a year.

In his closing remarks, Leonard referenced other companies’ perspectives on AI: one founder said AI would grow their total addressable market (TAM); another example involved a major soft drink company that grew sales by 7–8% due to AI, yet its stock declined. His final takeaway? Predicting the future is hard, but monitoring real-time developments is far more practical. Investors should approach AI with curiosity and caution—not certainty.

Ultimately, CSU’s message was clear: AI has not significantly changed its business model, M&A strategy, or long-term outlook—yet. But uncertainty itself is a disruptor, and markets don’t reward uncertainty. As a result, CSU may no longer command the premium valuation multiple it once did. The probability of sustained double-digit growth may have decreased—but CSU’s underlying fundamentals remain strong. It’s not going anywhere.

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Disclosure: The analyst(s) responsible for this report do not have a financial or other interest in the securities mentioned.